Our next item of business is to take evidence on devolved taxes implementation from Eleanor Emberson, head of Revenue Scotland, Scottish Government; John King, director of registration, Registers of Scotland; and John Kenny, head of national operations, Scottish Environment Protection Agency. Of course, all the witnesses were here three weeks ago. It is no secret that they are here today because of issues raised in the Auditor General for Scotland’s report “Preparations for the implementation of the Scotland Act 2012”.
Without further ado, we will go straight into that. The witnesses know the drill: I will ask a specific question and it is up to you who wants to answer it. For the first question, I will go straight to the “Key messages” in the summary of the report. Paragraph 1, which should be familiar, states that
“delays have reduced the time available to develop the IT system and appoint staff. As a result, there is increased risk that the IT system may not be fully operational by 1 April 2015 and that Revenue Scotland may not have the expertise to manage the devolved taxes effectively from 1 April 2015.”
What are your initial comments on that statement, please?
Good morning, convener. I am happy to answer. As I made clear in my evidence to the committee on 26 November, we are confident that we are on track. We worked through the material in the report with the Auditor General, so we agree on the facts, but the conclusions that were drawn from those facts are the Auditor General’s, not ours.
The Auditor General notes increases in risk, but we recognise that we are managing the risks. Managing programmes and projects is not simply about writing plans and following them; it is about staying on top of any problems that arise, actively managing risk, watching the critical path—to use the terminology—and making sure that we are ready to deliver. We are confident that, on the areas that the Auditor General highlighted, we are managing any risks and we are still on track to deliver.
All colleagues round the table have a copy of the Official Report of the committee’s meeting three weeks ago, so some of them might ask questions based directly on that. However, I will stick to the Auditor General’s report. She made recommendations for Revenue Scotland in the summary, the second of which is that it should
“clarify what progress needs to be made to ensure the IT system to collect the devolved taxes will be in place by 1 April 2015, to inform its decision on whether to implement its contingency plans”.
The introduction before paragraph 27 of the report says:
“There is a risk that the IT system for collecting the devolved taxes will not be fully implemented by 1 April 2015”.
Paragraph 27 states:
“The timescale for implementing the new system is now very tight and there is a risk that”
it
“will not be in place in time.”
I understood from the evidence that you gave the committee before that the system would, in effect, be completed by the end of January 2015 and you would have two months for testing. Is that still the timescale and is it a realistic timescale for eliminating “glitches”, which is the word that you used in your previous evidence?
Absolutely. The system is undergoing internal testing at the moment. We will move to external-user testing in January with people who will eventually be users of the system. In my previous evidence, I referred in lay language to snagging being done in February and March, which will be a standstill period for what is called a restricted testing environment, in which a range of eventual users of the system will have a fully tested version of the system to—I am told that I am allowed to use this term—“play with” in order to ensure that everyone is confident that it is absolutely fine. We are testing internally now and will be testing externally in January, and we have every reason to suppose that we are on track to deliver for 1 April.
I am pleased to hear that. The Auditor General highlights in paragraph 20 her view that
“A clear understanding between Revenue Scotland, RoS and SEPA about their respective roles and responsibilities ... has only recently been established.”
Can you talk us through that a wee bit?
Certainly. I think that that point has interested the committee in the past. We took a deliberate approach from the very beginning for Registers of Scotland, Revenue Scotland and SEPA to work together to develop the plans for collecting the taxes. That involves all the elements, so we have worked together on how the processes should work, how we will do compliance and how we will manage communications with taxpayers and so on. As we have got close to the end and as we understand what the processes look like and we know all the details of the communication plans and so on, that has allowed us to decide which of the bodies will do which element of work.
What we did not do was sit down at the beginning and say, “Right—why don’t you do compliance and we’ll do something else, and we can go away and work on those things?” That would have led to a position that was not optimal from a taxpayer’s point of view.
We have been working on all this and considering how things would work from a taxpayer’s point of view, so that the taxes are as easy as possible to pay and as hard as possible to avoid. We allocated roles and responsibilities near the end of the process once we were confident that we knew how we wanted it all to work.
John King or John Kenny might wish to add something.
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We have had a positive collaborative working relationship. We have gone with the best person to do the best job, and the process has evolved from there. We have certainty and clarity on the role that we will have to undertake from 1 April.
The Auditor General highlights in her report a number of concerns regarding staffing, which we touched on when you were before the committee three weeks ago. She refers at paragraph 16 to
“delays in recruiting to the tax administration programme division”,
and states that
“there was no clear resourcing plan setting out the number, positions and grades of staff”.
At paragraph 26, she states:
“the risk remains that Revenue Scotland will not fill all of the operational posts in line with its revised plans.”
I was very concerned by the issues raised at paragraph 41, in which the Auditor General states:
“The Scottish Government’s current assessment is that while it currently has enough skilled people in place to fulfil its responsibilities, it is dependent on a single member of staff and consequently there is a need to consider resilience as April 2016 approaches.”
That relates to the Scottish rate of income tax, of course.
Is it the case that you are dependent for the whole structure on one individual? Will you talk us through some of the issues in relation to staffing?
Certainly. You are right that paragraph 41 refers to the Scottish rate of income tax, so the point does not relate to Revenue Scotland, ROS or SEPA, but we can say something about it if that would be helpful.
There are two elements to Revenue Scotland’s staffing. There is the programme team, which has been working on the set-up of all the elements—the processes, the information technology, the technical guidance and the communications. We are now developing the operational team, which will run all this live.
The delays that the Auditor General highlighted, and the point about the resourcing plan at paragraph 16, relate to the programme team and the set-up. The Auditor General argues that we should have had more staff earlier in the set-up. With hindsight, I think that that would have been helpful, but I do not accept that it was “required”, which was the Auditor General’s language in a headline. If we had had more people in place sooner—very slightly sooner; perhaps a couple of months sooner—that would have made things go more smoothly, but it would not have materially changed the position that we are in today.
The operational staffing position has moved on significantly since the Auditor General’s staff carried out their work in October. The First Minister updated Parliament on the matter last week, but I can give the committee more up-to-date figures, as of yesterday. Of the 40 operational staff, 21 have been recruited, and eight posts are going through the recruitment process. Three posts have interviews scheduled, and five are at a slightly earlier stage. That will leave us with 11 posts, which we will advertise as planned in January.
We do not need absolutely all 40 people in place to go live on 1 April 2015, but we are very confident that we will have all the staff that we need for that date, and we are aiming to have all 40 in place.
To cut a long story short, your view is that things will happen as planned on 1 April and there will be no glitches in the collection of the devolved taxes.
That is certainly what we plan to achieve. We have explained all that to the committee, but we can look at the individual elements today.
The point about the Scottish rate of income tax is for my colleagues, but I recognise the reference, which is a little misleading. One member of staff is concentrating significantly on working with Her Majesty’s Revenue and Customs on the Scottish rate of income tax. However, he has an entire finance team around him, with lots of other expertise to draw on, as well as access to other colleagues and, until recently, my involvement. Technically, one person is leading that, but a lot of people can bring their expertise to it.
I have one further question before I open the session out to my colleagues. Page 18 of the Auditor General’s report contains recommendations on what Revenue Scotland should do. It says that Revenue Scotland should
“finalise its contingency plans and ensure that the points at which contingencies would be activated allow sufficient time for effective tax collection from 1 April 2015.”
Has that been done?
Yes. We have done more work on our contingency plan and we know that we could invoke it around the end of February, if we need to, and be ready for 1 April.
I will focus on IT, but first I will ask about staffing, to follow on from your earlier answer. On Thursday 11 December, the First Minister said that 16 job offers had been accepted, five were going through the normal recruitment process and 14 posts would be advertised in January. Six days later, 21 staff are in place, eight offers have been made and 11 posts are being advertised in January. Have we appointed people before we have advertised posts? Can you explain the discrepancy?
Yes. The 21 staff relate to the 16 staff and five offers mentioned by the First Minister. The eight staff who are being recruited involve three posts for which interviews are scheduled and five more that are at an earlier stage in the recruitment process.
All that has happened is that we have moved a little faster on advertising some of the jobs. The First Minister highlighted 14 posts that were still to be advertised, but I am saying that we are now down to 11, because three posts have gone into the advert system. We planned to advertise 14 posts in January, but we have gone ahead with three of them slightly earlier.
Are you saying that we have advertised additional posts after Thursday and there are interviews lined up?
Yes.
Right.
Paragraph 32, on page 15 of the report, jumped out at me. It says:
“Due to the tight timescales, Revenue Scotland is prioritising the development of the part of the IT system that it will use to process tax returns. The public-facing part of the system through which people will submit their tax returns online will be developed after this, which may be after April 2015.”
Please will you explain that?
That is not the current position. We carried out the system development in the order highlighted by the Auditor General. We built the back end of the system first—the bit that does the management, tracks cases and makes all the calculations—and now we need to connect that to what is called a public-facing portal. We will do that in January, as part of the user testing that I referred to. The Auditor General’s staff noted the order in which we were doing things and said that something might not happen until after April, but it will now happen in January.
Let us take the two parts separately. First, would you describe the part that processes the tax returns as back end or front end?
That is back end.
Where are we with the back-end system?
I have seen a demo, as have others. Colleagues in Revenue Scotland are doing internal testing on the back end, as they have done for some time—we are iterating the testing, as one does. In January, all of that and the public-facing part will move to user testing involving external users. People who will be end users of the system, such as solicitors or those who work in their offices, will come in and help with the system testing.
I return to the back end. Is the system complete or close to complete, and are you now simply testing it?
I would never describe anything as complete until all the testing was complete, because that would not be proper. The main development work is done, which is why we are in the position to do testing and why I can give the committee some confidence that we will deliver for April.
You previously said that a first version of the back end will be tested internally, then a full version will come out. Is it just version 1 that is being tested at the moment or is it what you might have described previously as a full version?
We have been iterating the development, so we have had a version of the system and done tests. Things have been spotted and comments have been made. They have gone back to the developer, who has addressed the points and given us another release of the system, and we do all that again and again. The process has not been for us to get a release to test and then get another release; it has been more iterative than that. Does that help?
It helps. Are there no formal releases?
There are formal releases.
How many formal releases have there been?
We had a readiness release at the end of November, which was a formal release. Iterations have been going on but, to be honest, I would have to check the details of the plans before putting any wording around releases in the new year. External users will test the system in January and we aim to have a release at the end of January.
Forgive me for dwelling on this. You had an initial release of the back-end system. Has there been a second formal release of that system?
I hesitate to answer because of the language involved.
Sure. I am happy for you to hesitate, because I want to get to the bottom of the issue. I would prefer you to hesitate than to tell me the wrong thing. I am keen to explore the facts.
The fact is that we had the release that we were expecting at the end of November, and iterative testing is being done on that. We will do the further testing that we expect in January and we will have the release that we expect in the new year—well, we plan to have another release in the new year. I understand that, each time we go through a new iteration, that could be described as another release.
I understand that. The next release is planned for the new year. To be accurate on that, are you talking about early January or the end of January? Do you have a timescale?
If we are talking about formal points of release, the next formal one will be at the end of January, after we have done the testing involving external users. That is as I understand the situation but, if I have any of that wrong, I will write to the committee to correct it.
That is the back-end system, so let us move to the front end of the system, which users will interact with. When Audit Scotland’s report was written, the Auditor General’s opinion was that it could be after April 2015 before the front end was working formally. What is the current prediction from Revenue Scotland?
We expect to have that in January. There is not a lot to the front end. We have developed an online form and, when we go live, Revenue Scotland will see the same form as online users see. The online portal is about getting the back end into a position for external users. The front end is not a massive additional system in its own right. We also have a case management system for Revenue Scotland staff to be sure that they are managing every stage of the tax collection process.
If the Auditor General or anyone else was to audit the IT system today, would they highlight any bits as a risk or say that there was a chance that those bits would not be ready for April?
If anyone looked at an IT system and said that there was absolutely no risk before the system was fully tested and live, that would be unusual. There is no unusual level of risk here; we think that we are completely on top of the development. We are managing the risks and doing the internal testing. We are also confident that the external testing will work and that we will be ready to go.
I take your point about the term “no risk”. Of course nothing in life is risk free. If we look at all aspects of the IT system at present, is there any element about which an objective person would say that there is a reasonable risk or a strong possibility that it will not be ready by 1 April?
11:45
I do not believe so.
To go back to the Audit Scotland report, paragraph 35, which is on page 15, states:
“In recognition of the reducing time available between now and 1 April 2015 to establish the required IT systems, the IT implementation group is developing contingency plans.”
My understanding from our previous evidence session on the issue was that you had the contingency plans just because you were super-cautious and you were taking a belt, braces and a piece of string approach. However, the report suggests that the reason for those plans being developed at this stage is that it is a response to the reducing time available. Is Audit Scotland’s interpretation correct, or do you disagree with it?
We would have done the contingency planning anyway. We have to do that because, as we have just discussed, until an IT system is fully tested and live, there is always some level of risk that there might be a problem. No red flag has gone up that has led us to think that we suddenly have to do contingency planning—it was part of what we were always going to do.
That sounds as though you disagree. Audit Scotland specifically states that the contingency planning is
“In recognition of the reducing time available”.
You disagree with that conclusion.
That is not my perception of the situation. We would have done the contingency planning anyway.
On contingency, the last time that you were at the committee, you talked about contingency being developed and said that you would make a decision on that in December. We are now in December. When will you take a decision that we need to implement the contingency plan or that we do not need to go near it?
We have refined our contingency plan considerably. On our first pass, we looked at a plan that might have had a 12-week lead time, which in effect would have meant that, by the end of December, we would have had to decide whether we needed to go into the contingency. We have done a lot of work on the plan and we now have a version that we could implement around the end of February, with a lead time of four weeks or so. Therefore, we do not need to make that decision today.
Last time, you talked about there being a few ambers and you said that you were “doing an assessment”. What is currently amber for the project that you are allowed to talk about publicly?
The last time, I talked to you about the aggregate reporting and I said that there were about two dozen indicators. I should correct myself, because I went away and counted them and found that there were three dozen indicators and some of them were amber.
Underneath all that, there are individual products, as we call them—individual things that we need to put in place. That might be a piece of guidance, the design of a process or something to do with staffing or whatever. There are 568 of those products and, when we did the assessment to which you refer, 27 were at amber. We had a programme board meeting yesterday, at which we heard that 17 are now at amber. The situation changes week to week. That takes me to the point that managing projects is not about having no risk; it is about managing risk and delivery. Every week, we reassess where we are on the delivery of all the individual elements. If we need to take action to bring something back on track, we do that.
Is there anything that the committee should know about that is not on track or where there is a potential risk of things not happening?
There is nothing that the committee should know about that we are not managing.
I want to go slightly into the past but, before I do that, I have one question on that issue, although Gavin Brown has covered it exhaustively. Gavin asked about paragraph 32 of the report in detail, and he quoted the sentence that states:
“The public-facing part of the system through which people will submit their tax returns online will be developed after this, which may be after April 2015.”
You said at the beginning that you checked the report for accuracy. Would you have challenged that at the time that it was raised with you? Would you not have told the Auditor General that the system would definitely be tested in January? How did the comment about April arise?
The word that is used is “may”. At the time that the Auditor General’s staff were doing the work on all this, they were looking at plans and they obviously took the view that there was some possibility that we would not deliver on plan and that that would happen. We can challenge factual things in the Audit Scotland report, but we cannot really change the Auditor General’s assessment of the position.
Was it in your plan at that stage that all this would be tested externally in January?
Oh yes.
I will go back to the past, which seemed to be the source of some of the concerns. I will stick with IT first. There is more than one reference to slippage on page 13 of the report. One sentence in paragraph 30 states:
“Revenue Scotland aimed to identify a supplier for the IT system by April 2014, but this took four months longer than planned”.
There is then a reference to advertising a tender in mid-June. Did the advertising and the decision about what kind of IT system was required and how to commission it slip in the way that the Auditor General suggests? If so, why?
It is helpful to look at exhibit 3 on page 14 of the report. There was a period between January and April when we were working with the Scottish Government’s internal IT team. We were strongly attracted to the idea of doing the IT development in-house for a variety of reasons, including value for money. We worked with the Scottish Government’s IT team so that it fully understood the system requirements that we had developed and so that we could assess whether it had the capability to develop the system. At the end of April, we came to the conclusion that that was not the best option—it was not, in fact, the lowest-risk option.
From the very end of April, when that decision was taken, we went out to tender within six weeks. We were out to tender in the middle of June and had the contract awarded by the middle of August. We went out through an existing Scottish Government framework contract. We have a supplier that has already done work for the Scottish Government. I do not think that Audit Scotland would challenge the decision to use the external supplier, but we spent a period of time looking at an in-house option—we did so between January and April, which I think is the four months that the Auditor General is referring to.
I think that that explains the reference to the four months. Thank you.
I want to move on to the staffing side of things. You have indicated where we are now, but I want to go back to the past. Page 12 of the report makes various references to slippage. It says:
“confirm job descriptions and grades by the beginning of October 2014 (originally August)”
and
“confirm job descriptions and grades by mid-October 2014 (originally September).”
Was there slippage in terms of decisions about staff and the advertising for staff? If so, why did that arise?
I do not think that there was slippage in terms of decision taking. Within a programme, there are rapidly changing environments. Plans are not something that you make and never revisit. During that period, we were thinking through our plans for staffing. At a very early stage—I think that I am going back well over a year—we had thought that we might have all the operational staff in for the end of October. When we looked at that, we thought, “It doesn’t make sense to have all those people in. What are we going to do with them?” We moved to a different phasing, and then we moved again. There is not a problem on the operational staffing side. We are on track to have the staff we need for 1 April. The fact that the plan has evolved is simply the natural thing that happens within a project.
You have admitted that you would rather have had more programme team staff earlier. Is there any relationship between that staff shortage and some of the slippage in operational decision making?
No. We have had a well-staffed programme team for quite a lot of months now. All the relevant people were in post at the point that we were doing this. Having had more programme staff in sooner might have helped us to evolve our plans a little sooner. That would have been useful, but it would not have meant that we would have wound up with more operational staff in post sooner.
You have said that you do not really need any contingency because you are going to have the staff, but if you were short of operational staff, would it be possible for some of the programme people to stay longer, or are they doing completely different things? Are they not interchangeable, as it were?
A number of the programme staff are not interchangeable, but some would be. I have mentioned that we will have 11 staff left to recruit in the new year; we have prioritised filling the solicitor, tax specialist and accountant posts, while the last tranche of staff that we are coming to will have what I might call generic skills. If we were really struggling, I would be able to look around the whole of the Scottish Administration for staff.
But why have you waited until January to recruit those 11 staff instead of advertising for them in November or whenever?
People have to sift and interview, and we have to have something for those people to do when they come in. It is simply a question of what work they will be doing and, indeed, who will actually undertake the recruitment, because we stagger the recruitment to ensure that we are not doing all the interviews in the same week.
Thank you.
I am sorry—I was just speaking to the clerk about this issue. Surely you can interview someone in November and not have them start until January or February. I do not understand why you would leave it so late, because I would have thought that such positions of expertise would be fairly few and far between and that not many people could fulfil such tasks. If you leave it to the last minute, the people in question might be doing other work and might not be available. I can understand why you might not want someone to start until relatively late in the process, but why would you not interview earlier to ensure that these people are available when you require them?
We have interviewed for the posts that we thought would be hardest to fill. As I mentioned—you might not have heard—we have pressed ahead and recruited people with tax expertise, a solicitor, an accountant and a statistician to help with performance monitoring. We did that on a risk basis, so we went ahead earliest with the staff who we thought might be the most challenging to secure, with the rest of the team coming in behind. I do not need absolutely all of the 40 to be in post for 1 April; we are aiming to bring them in in time for 1 April, but if some of those posts are not filled, it will not prevent us from going live.
Thank you.
Most of the ground has already been covered, but I have to say that I remember that when I was a member of a local authority audit committee I was told that I needed to understand the difference between risk and likelihood. That has come through in the responses that have been made.
On the issue of staffing, I was not a member of the Finance Committee at the time, but I note from previous evidence-taking sessions that you stated in October that
“all key appointments”
would
“be in post by February 2015.”
Can you confirm that that will be the case?
Yes. I think that the key appointments are now actually in place.
That is fine, convener. That was the only question that I had, because committee members have pretty much covered everything else.
That is not like you, Mark. Perhaps you need to go for a lie down after the meeting. [Laughter.]
We have covered quite a lot of the ground, particularly with regard to paragraph 23 on page 12 of the Audit Scotland report and, indeed, the headline on that page, which refers to the
“risk that Revenue Scotland will not fill all of its operational posts”.
Malcolm Chisholm has already referred to the slippage—or the apparent slippage—highlighted in the two bullet points in paragraph 23.
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We made the decision that we think makes the best sense in light of the business, so we hope that we have now made the best decision. The key thing for the committee to note is that 21 people have been identified, eight more posts are well in hand and we have only 11 still to fill. One can go backwards and forwards over plans, but the important thing is that we are going to have all the people in place.
Audit Scotland says that you could have recruited people a bit earlier, but if you had done that and gone over your budget, it would have criticised you for recruiting people too early.
There is always that judgment to be made. The same is true on the point about the programme staff. If I had brought in more programme staff earlier, I would indeed have spent more money. We are always juggling value for money and ensuring that we can deliver, and we think that we have a plan that works and that delivers value for money.
The word “risk” has floated around quite a lot and you have said that there was no unusual level of risk. It seems to me that Audit Scotland throws the word “risk” around quite loosely. We have already talked about greens, ambers and reds, which are fairly broad spectrums. I do not know whether you have a risk register, but when you look at risk, do you narrow it down beyond that? There could be a 95 per cent risk or a 5 per cent risk that something is going to happen. Do you look at it that way?
Under the standard methodology, we look at the impact and the likelihood of risks. We ask what the impact would be if a risk were to materialise and how likely it is to happen. I am afraid that we do not measure them in percentages, but we have the usual high, medium and low categories on a five-point scale of risk.
Do we know what Audit Scotland means when it talks about risk? Does Audit Scotland analyse risk or does it just use the word meaning that the risk could be 1 per cent or 99 per cent or anything in between?
You would have to ask the Auditor General how Audit Scotland evaluates risk. There is not a quantification of risk that I can see in the report. It talks about risks being higher or lower, but I am not aware of a scale.
Paragraph 26 states:
“However, the risk remains that Revenue Scotland will not fill all of the operational posts in line with its revised plans.”
There is a risk that all the shops will be closed next week and I will not get my Christmas shopping done, but presumably that is quite a small risk.
Do not forget my present.
I think that you would accept that there is a risk, but what is the risk—or what was the risk—that Revenue Scotland will not fill all of the operational posts? Can you put a figure on it?
I can tell you now that the risk is significantly lower than it would have been at the time that Audit Scotland was looking at the issue, because we are two months further on and we have filled a lot of those posts. I do not think that I could put a figure on it for you, but I do not see it as a high risk now at all.
If I said that it was a 10 per cent risk and it is now a 5 per cent risk, would you argue with that?
I would not argue, but it is a much lower risk now than it was, and I did not think that it was a high risk at the time.
Thank you. That will do me.
Mark McDonald is now desperate to come in.
It is just because we have gone back on to the area of risk. As I understand it, there are two types of risk, or two analyses of risk. One is the risk that something will not happen—in other words, the likelihood—and the other is the risk to the organisation if something happens. You distinguish risk in two ways, therefore, by looking at the risk that something will not happen and at the risk to the organisation if it does not happen. Do you make those distinctions in applying your reds, ambers and greens? The two are obviously not the same thing.
For any particular element of risk, we look at both the impact and the likelihood. Reds, ambers and greens are in effect a product of those two things. We are in danger of going a long way into project and programme management methodology, but we have a 1 to 5 score for likelihood and a 1 to 5 score for impact, we make our best assessment and we recognise that the levels change frequently, so we review the situation regularly—weekly or monthly. A risk with a low likelihood but a high impact might still appear to have a score on the risk register, because although you recognise that it is unlikely to happen you still need to be careful about it, because if it were to happen, it would have a high impact.
We do not have the Auditor General here, but it is not always clear from reading the report whether the risk refers to likelihood, impact or a combination of the two.
I think that you can assume that what the Auditor General is looking at here is risks that would have a high impact. If we did not have enough operational staff for 1 April or our IT was not ready and we did not have a good contingency plan, there would be a very big impact on our ability to collect the devolved taxes. However, we do not see those things as high likelihoods and we are managing them to manage down the likelihood—that is the way we go about all of this.
Okay. I am done now.
It is good to know that politicians on local authority audit committees and politicians round this table understand the difference between a risk and a likelihood. Do you think that the Auditor General would understand that?
Impact and likelihood are both elements of risk. I am sure that the Auditor General understands that, but you would have to speak to her to—
It is good to know that we are not debating a report compiled by someone who would not know what they were talking about.
In her report, the Auditor General says that you have been preparing for this for two years, but it does not look as though it is ready—that is the summary, from my reading of it. Do you think that Audit Scotland would have said that if it did not believe that that was the case?
No, of course not. I am sure that the Auditor General has presented a report that is her assessment of the facts that have been laid in front of her.
So when Audit Scotland says that not enough staff have been put in place early enough, you consider that to be an accurate assessment of the situation from its perspective.
Audit Scotland has looked at the staff that we had at each stage and it is saying that, in its judgment, there were not enough. I am saying that I think that it would have been better, if I had my time over again, to put more programme staff in place earlier, but I do not accept that they were required and I do not accept that that would have made a material difference to where we are now.
Was it entirely your decision that staff were not in place at the time when the study was undertaken?
The plans for recruitment were my decision. There were some delays in the programme staff recruitment that were not my decision. They were to do with whether we could get people with the right expertise at the time.
I am sure that you have a degree of autonomy to make those types of decisions, but were the Government ministers who are responsible for your office aware of that? Did they sanction it? Did they approve of your decision not to get the staff in at the time that the Auditor General thought was timeous?
I have not discussed staff recruitment with ministers at any point. I am clear on ministers’ expectations. It is my job to make sure that I do all the things—staff the team, manage the plans and make it all work. That is my responsibility, not ministers’ responsibility.
So no minister spoke to you about the preparedness of your department to do this.
Just as we provide reports to the committee, we provide updates to ministers about our progress, but I have never had a conversation with a minister about my detailed staffing plans or how many staff I was recruiting at different stages.
When you were here in November, you said to the committee:
“There has been a lot of progress but there is nothing negative that I need to report.”—[Official Report, Finance Committee, 26 November 2014; c 29.]
That seems strange. You must have known of Audit Scotland’s report at that time, and known that the criticisms existed. Did you just ignore the criticisms when you said that to us?
There are two things. I said that in response to a question—I think it was from Gavin Brown—about what had happened since the written report that I provided to the committee in the middle of October. I provided you with a written update, and the question was, given that we were at the end of November, whether anything had happened in the interim that I needed to report. I said:
“There has been a lot of progress but there is nothing negative that I need to report.”
I was aware that Audit Scotland was going to report, but I could not discuss that with the committee because that report was not in the public domain. I was aware that the Auditor General would be criticising some things that had happened at a much earlier stage in the programme and that she would have issues about risk. However, I stand by what I said to the committee. We are on track to deliver and we are managing the risks. I do not see a problem.
You have taken to task the point made in the report that only one member of staff is responsible for this. I understand your explanation for that, which is that other staff were available and part of the team. What else were those staff doing if they were not directly hands on, as the individual member of staff was? Were they deployed to other responsibilities at that time?
None of this relates to any of the Revenue Scotland teams. The point about a single member of staff in paragraph 41 relates to the Scottish rate of income tax and the member of staff it refers to works in one of the Scottish Government finance policy teams. He has a range of colleagues around him who work in Scottish Government finance, who do all the different things that one would expect, including finance policy, payments and professional accountancy. All those people have other jobs, but he can draw on their expertise.
What else would they have been doing other than their jobs?
They would not have been doing anything other than their jobs. Part of what the Scottish Government finance team is doing at the moment, collectively, is working with HMRC on the Scottish rate of income tax.
You explained that a decision to bring people in earlier would have increased the cost of staffing, but the overall costs have already risen by £2 million. You said that you were
“managing the project very tightly and are ensuring that it delivers what it needs to deliver and stays within budget.” —[Official Report, Finance Committee, 26 November 2014; c 25.]
The project was already not within budget. How much more would it have gone up and how much more will it go up?
The cost has gone up by £1.7 million. How much it would have gone up if I had brought in more staff earlier would depend on which staff I had brought in and when I had done so.
I have no expectation that the cost will go up further. We now have a full programme team. As I reported to the committee before, I have scheduled the set-up team to continue in place for a number of months into 2015-16. I have given you my full estimate of what I think that it will cost in set-up and operation. I do not have any expectation that that £1.7 million will increase.
You have told us that you have a contingency plan and that, had it been necessary to put it in place before now, it could have been, but that it is more likely that it will not be required until February, if at all. What is the contingency? What is the plan?
When the IT system goes live, we will still be offering solicitors a paper tax return. We would prefer them to use the online system, but we have heard from the Law Society for Scotland and solicitors’ representatives that not all solicitors are ready or willing to use an online system. We took a policy decision that we would both provide them with a paper form and build an online system. Our aim is that the system will be so attractive that eventually we will be able to move everyone online. The contingency plan is that we would use the paper form for all tax returns for a short period from 1 April until the IT was finalised, if absolutely required.
Will that contingency be considered to have been put in place only if all returns are done on paper?
We have to do certain things behind the scenes to ensure that we are ready to process that volume of paper returns, if that were to be the case. We would make an active decision to invoke the contingency plan if we needed to do it.
How much have you projected will be done by paper? What is your expectation of the level of paper returns, regardless of whether there is a contingency?
It will be helpful if I bring in my colleague John King from ROS at this point, as ROS has experience of working with solicitors on online and paper registration.
12:15
The planning assumption was that 90 per cent of returns would be submitted online. The evidence for that is the percentage of returns that are currently submitted to HMRC through its e-filing system. The assumption is also based on the recent experience of ROS. A week past Monday, we launched four new IT systems to support the Land Registration etc (Scotland) Act 2012, a couple of which are voluntary electronic systems. We have seen a dramatic increase in solicitors’ uptake of them, which we think bodes well for the assumption that 90 per cent of returns for LBTT will be submitted online.
Your expectation is that 90 per cent of solicitors want to file an online return. If 80 or 70 per cent make use of it, does that mean that the system was not ready?
No. Either the IT system will be there or it will not. If we have an IT system in place and only 85 per cent of people choose to use it, then only 85 per cent of them have chosen to use it—that is simply their choice. We will then work with them to encourage them to use the IT system.
It has always been in the communications plan that, somewhere between January and March, a considerable degree of focus will be on explaining to solicitors what is involved in the new Land and Buildings Transactions Tax and in the mechanics of submitting a return, and on encouraging them to move to or stay with an electronic version of submission. Colleagues in Revenue Scotland have various roadshows planned to convey those messages to the solicitor community.
As you have answered everything comprehensively, I have just a short question. On the budget and the overspend, was there any connection between the—for want of a better word—slippage of employment from your original plan and trying to save money? Perhaps I have not looked at it carefully enough, but, in other words, is the difference between the estimated budget and the greater amount spent in reality related in any way to the criticisms in the Auditor General’s report?
No, we have not deliberately delayed staff recruitment to try to save money. We have been very focused on what we need in the way of staffing in order to successfully deliver. Had we allowed budget to dominate delivery, we would not be overspending at all, but in fact we are completely focused on making sure that everything is in place for April.
There may have been an element in your question that I have not answered.
What caused the increase in the budget that was not anticipated?
It is all staff, and it is all programme set-up staff. We brought in additional staff to make sure that we manage the programme and the IT project tightly and have people in place to do all the work that needs to be done to deliver for 1 April. To manage risk, we have brought in additional staff to make sure that we are on top of all that.
Were you surprised by the Auditor General’s report, or do you think that there were areas that she was right to highlight?
It was not a surprise to me by the time it was published, because I had spent a lot of time with her staff discussing findings and evidence. I have to say that I do not share her perception, but I have a perspective sitting within the programme and she has a different perspective.
That concludes questions from colleagues around the table. I will ask a final question, which relates to the Auditor General’s recommendation that
“Revenue Scotland needs to consider how to report on its performance in collecting devolved taxes”.
Paragraph 60 notes
“Revenue Scotland is in the process of developing a performance reporting framework.”
Can you give us information on how that is going forward?
We have a statistician who is doing a lot of work on that at the moment, for both internal reports and what we might report externally. One thing that she has done is go through the various discussions that there have been with committees and through other questions that have been asked publicly. She is trying to make sure that we map out a framework that addresses the sorts of questions that we anticipate that Audit Scotland, the Parliament and the public will be interested in.
However, I would be very much interested in taking the committee’s view on that before we put a final framework in place. We would like to share something with you at some point and to test with you whether the performance reporting framework that we imagine having will meet your needs.
That is very helpful. Jim Johnston has written that down while you were speaking.
If our witnesses do not have any further points that they wish to make to the committee, I thank them for their evidence today. I thank members for their questions today and indeed all year.
I wish all committee members and all staff a great Christmas and a happy new year.
Meeting closed at 12:20.Previous
Further Fiscal Devolution